View the step-by-step solution to:

Timmis Limited, in the first year of its operations, reported the following information regarding its operations: Income before tax for the year was...

Timmis Limited, in the first year of its operations, reported the following information regarding its operations:


Income before tax for the year was $1,500,000 and the tax rate was 38%.

Depreciation was $120,000 and CCA was $67,000. Net book value at year-end was $840,000, while UCC was $893,000.

The warranty program generated an estimated cost (expense) on the statement of profit and loss of $257,000 but the cash paid out was $174,000. The $83,000 liability resulting from this was shown as a current liability. On the income tax return, the cash paid is the amount deductible.

Entertainment expenses of $55,000 were included in the statement of profit and loss but were not allowed to be deducted for tax purposes.

In the second year of its operations, Timmis Limited reported the following information:

Income before income tax for the year was $1,750,000 and the tax rate was 40%.

Depreciation was $120,000 and the CCA was $370,000. Net book value at year-end was $720,000, while UCC was $523,000.

The estimated costs of the warranty program were $287,000 and the cash paid out was $242,000. The liability had a balance of $128,000.

Required:

Prepare the journal entry to record income tax expense in the first and second year of operations. The second-year tax rate was not enacted until the second year.
Sign up to view the entire interaction

Top Answer

Dear Student, I have reviewed your assignment thoroughly, based on your assignment details and current... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online